Tatua Co-operative Dairy Company will build a new $65 million specialised powder dryer after the project was approved unanimously by its shareholders.

The Waikato dairy company is working through the tendering process to have the dryer built at its main milk processing site near Morrinsville. Construction is expected to begin in March 2014.

The dryer project was passed by shareholders earlier this month.

Tatua chief executive Paul McGilvary said the new dryer would mean the creation of 31 new jobs at the factory.

"We would like to think we would have it completed by mid 2015 so it will be ready to sell product by the start of the 2015-2016 season."

McGilvary said the new dryer was the biggest project the company had ever undertaken.

"The goal of the dryer is to add further value to what we already produce."

The new dryer would dry hydrolised protein. Hydrolisation is the process where products are turned into a pre- digested form. Hydrolised protein is used extensively in infant formula, enteral formula for invalids and the elderly and in sports foods.

"Tatua already makes the raw material so this dryer will be adding further value to our existing raw material stream," McGilvary said.

Tatua would also look to bring in hydrolised protein from outside their existing supply base, however there were no moves to increase the numbers of supplying farmers, he said.

Tatua does not make any milk powders.

Its manufacturing divisions include caseinates and whey protein concentrate; food service products such as whipping and cooking cream, icecream, creme fraiche; consumer products; bionutrients for biopharmaceutical production, diagnostic media and cell culture media; special nutritionals including baby formula ingredients such as hydrolysates, and lactoferrin; and flavour ingredients.

Construction of the new dryer coincides with the company celebrating its 100th anniversary, which will be celebrated with four major functions throughout the year including a trip by 35 of the company's 109 shareholders in April to tour the company's plant in Japan.

"We're the first dairy company in New Zealand to ever turn 100 and it's a big milestone not only for Tatua but for the New Zealand dairy industry."

Production-wise, the company in November was 3 per cent ahead of last year, which was very strong, he said.

Everything now depended on how it went for the rest of the summer and he was hopeful it would not get as dry again.

The price differential between milk powder and other dairy products including cheese and casein had also put Tatua at a disadvantage because their product mix was not as as favourable as milk powder.

McGilvary, who was in China earlier this month, said there was massive demand for milk there. That coincided with the country's ongoing attempts to modernise its dairy industry.

"People were talking about the sheer difficulty in getting milk, even at a retail level."

The larger scale dairy farms that China was building had yet to be established, but the rate that smaller family-owned farms were dropping out of the industry was exceeding the rate in which the larger farms were being built, he said.

"The way it manifests itself is pretty extraordinary demand for milk powder for re-constitution into liquid milk - great for New Zealand but not so great for Tatua. Caseinate is our product as opposed to milk powder and the market for casinate isn't as strong."

McGilvary said the whole market had lifted compared to last year despite the price differential.

"The market is higher, but we are relatively not as favoured."

He said that recent reports of Tatua farms selling well above the market value was a vote of confidence from farmers in the future of the company.

"You don't pay high prices for land unless you're reasonably confident about the future.